ISDA Agreements Between Banks And Mexican Corporation Are Enforceable Despite Illegality Defense Due To Choice Of Law Clause In Agreements

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In four related cases, Merrill Lynch Capital Markets AG and Merrill Lynch Capital Services, Inc. v. Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603214/2008 (Sup. Ct., NY County, March 16, 2010), JPMorgan Chase Bank, N.A. v. Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603215/2008 (Sup. Ct., NY County, March 16, 2010), J. Aron & Company v. Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603225/2008 (Sup. Ct., NY County, March 16, 2010), and Barclays Bank PLC v. Controladora Comercial Mexicana S.A.B. De C.V., Index No. 603233/2008 (Sup. Ct., NY County, March 16, 2010), Justice Eileen Bransten recently granted summary judgment on liability to the plaintiffs against Controladora Comercial Mexicana S.A.B. De C.V. (“CCM”), one of Mexico’s largest retailers and the operator of approximately 200 stores and 70 restaurants. In each of the cases, the plaintiff asserted breach of contract claims and CCM asserted the same affirmative defenses and counterclaims, which defenses were found to fail by Justice Bransten. Of particular interest was the court’s rejection of CCM’s defense that the agreements were illegal under Mexican law and, thus, could not be enforced.

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